Athens University of Economics and Business

An Introduction to Services
Marketing

Defining services

Activities, benefits and satisfactions, which are offered for

sale or are provided in connection with the sale of goods
(American Marketing Association, Committee of
Definitions 1960, p. 21).
Services include all economic activities whose output is
not a physical product or construction, is generally
consumed at the time it is produced, and provides added
value in forms (such as convenience, amusement,
timeliness, comfort or health) that are essentially
intangible concerns of its first purchaser (Quinn, Baruch
and Paquette, 1987).
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Services marketing:
from the state of disputed legitimacy
to a separate sub-discipline of
marketing

The life of services marketing has undergone three

stages:
The Crawling Out stage (Pre-1980)
The Scurrying About stage (1980-1985)
The Walking Erect stage (1986-today)

The Crawling Out Stage (Pre-1980)

(I)

A period of high risk:

If services marketing proved to have a case, the
sub-discipline would grow
If it was shown that services marketing was a mere
extension of goods marketing, the discipline would
have no solid base and would disappear

The objective:

To prove the right of services marketing to exist

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The Crawling Out Stage (Pre-1980)

(II)

Views of goods-nurtured marketing academics:

If services marketing becomes a sub-discipline with its own
stance, this could challenge the universality of marketing theory
and the coherence of marketing as a separate discipline
Why do we need to pay special attention to the marketing of
services, when they are just an aid (an important though) to the
production and marketing of goods? (Converse, 1921)
Views of service practitioners:
You cannot market a bank account by applying same rules that
are used for the marketing of a can of Campbells soup
The logic that services are lust like goods resembles the logic that
apples are like oranges except for their appleness (Shostack,
1977)
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The Scurrying About Stage (1980-1985)

(I)

The characteristics:

A notable increase in the interest of practitioners and

academics in the case of services marketing
The debate on the uniqueness of services marketing was
partly won

The objectives:

To reinforce, even further, the argument that, despite

similarities, the marketing of services necessitated a different
management approach
To prove empirically the necessity mentioned above
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The Scurrying About Stage (1980-1985)

(II)

The outcome:

A significant growth of the empirically based

knowledge on the special nature of services
Service

quality
Service encounters (the customer-seller dyadic
interaction at the point of sale)
Service design
New service development

The Walking Erect Stage (1986-2003)

(I)

The characteristics:

Very little, is any, further discussion is made on

whether or not services require a different marketing
management approach: the debate is won

The objective:

To conduct empirical research in new areas of

inquiry in services marketing

The Walking Erect Stage (1986-2003)

(II)

The outcome:

The empirical orientation and rigorousness of research on

services marketing increase
New areas of inquiry are empirically investigated

Customer retention
Relationship marketing
Green issues in services marketing
Branding services
Internationalisation of services
Direct services marketing
Sponsorship in services
Franchising in services

Services marketing is a respected sub-discipline of marketing

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The Special Characteristics of

Services

Intangibility
Inseparability of production and consumption
Heterogeneity
Perishability

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The Intangibility of Services (I)

It refers to the total lack or perception of a services characteristics

before and (often) after it is performed
The term was first used in 1963 (Regan)
It is the most radical characteristic of services, where from the
others emanate
Marketing implications
Great marketing skills in tangibilising intangible offerings, i.e., in
surrounding them with hard peripheral attributes
Technical superiority and long term vision in new service
development, in order to protect a service from its non-patentability
Special pricing know-how, i.e., what is the cost of a service?
Creative communications skills, i.e., what message to
communicate?
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The Intangibility of Services (II)

Criticism to the distinguishing power of intangibility

The inability of customers to physically evaluate
services is also the case in some goods
Repeated use of a service nullifies intangibility
Many goods have intangible elements too

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The Product Tangibility Spectrum

Salt
Soft drinks
Detergents
Automobiles
Cosmetics
Fast-food outlets

Tangible dominant
products

Intangible
dominant products

Fast-food
outlets Advertising
agencies Airlines
Investment
management

Shostack, 1977, Journal of

Marketing, Vol. 41, April, pp.73-80

Consulting
Teaching
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The Inseparability of Services (I)

It refers to the simultaneous production and consumption of

services

The production process of services has been called

servuction process (Eiglier and Langeard, 1977)
The customer is present when the service is produced
The customer plays a role in the servuction and the delivery
process
Customers interact with one another during the servuction
process and may be affected (positively or negatively) by this
interaction
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The Inseparability of Services (II)

Marketing implications
Mass production of services is difficult, if possible at all
No significant economies can be earned from centralization of
operations, since the service must be produced at the convenience
of customers (temporal and physical)
Service quality depends highly on what happens in real time, i.e.,
during the service encounter
Since customers have a vital role in the servuction and delivery
process, the service provider needs great skills to train them how
to play their role
The service provider must prove excellence each time the service
is produced
The service provider needs skills in order to tackle disruptions in
the servuction process, caused by problem customers
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The Heterogeneity of Services (I)

It refers to the potential for high variability in the performance and the
quality of services, caused by the interaction between the service
employee and the customer
The performance of the employees delivering one same service
varies:

Between different hour zones of the day

From employee to employee
From service company to service company

Not all customers play their role at the service encounter in a

homogenous and predictable way
Heterogeneity is particularly the case with labour intensive and
high-contact services
Heterogeneity is less visible in technology-based services
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The Heterogeneity of Services (II)

Marketing implications
Need to develop service blueprints (Shostack, 1977), i.e., a
production line approach to the servuction process
Ability to find a balance between standardisation and
personalization during service delivery
Ability for real time detection of which side of the encounter causes
service failure
Need for a mechanism of timely service recovery
Skillful selection and motivation of appropriate front-line employees
Criticism to the adequacy of heterogeneity as a line of demarcation
between goods and services
Not all services are heterogeneous, not all goods are
homogeneous
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The Perishability of Services

It refers to the fact that services cannot be saved, stored, resold or

returned
Difficulties in synchronising supply and demand for services
Marketing implications
Need for developing an as accurate as possible demand
forecasting mechanism
Need for a creative plan for capacity utilisation
Need for the implementation of strategies and actions to
accommodate malcontent customers from non-returnable services
Criticism to the adequacy of perishability as a line of demarcation
between goods and services
Under conditions of fierce competition and financial stringency, the
impact on profit of unsold stocks is as severe for manufacturers of
fast moving consumer goods as it is for the service industry
(Middleton, 1983)
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The Expanded Marketing Mix for

Services: 3 More Ps (I)

People
All humans who play a role in service delivery and who influence
the perceptions of customers (Zeithaml and Bitner, 1996)

Service delivery employees (front-line staff)

The general staff of the service company
The customer
The other customers that are present in the servuction and delivery
process

Physical Evidence
The setting where the service is delivered (Zeithaml and Bitner,
1996)

Where the service company and the customer interact

Any tangible components that facilitate performance or
communication of the service

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The Expanded Marketing Mix for

Services: 3 More Ps (II)

Process

The actual procedure, mechanisms and flow of activities

through which a service is delivered (Zeithaml and Bitner,
1986)
The dimensions of a processs efficiency and effectiveness:

Length: the number of steps that participants have to follow in

order to effect service delivery
Duration: the time that elapses from the first to the last activity
of the service delivery process
Logistical effectiveness: the degree of smoothness in the flow
of the steps of the service delivery process
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Towards a Strategic Classification

of Services

Services can be strategically classified according

to the following five dimensions (Lovelock, 1983)
What is the nature of the service act?
What type of relationship does the service
organisation have with its customers?
How much room is there for customisation and
judgment from the service provider?
What is the nature of demand and supply for the
service?
How is the service delivered?

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The Nature of the Services Act

Who or what is the direct recipient of the service?
What is the nature of
the service act?

People

Things

Tangible actions

Services directed at
peoples bodies, e.g.:
health care
Haircutting
Beauty salons

Services directed at
goods physical
possessions, e.g.:
Freight transportation
Laundry and dry cleaning
Industrial equipment
repair

Intangible actions

Services delivered at
peoples minds, e.g.:
Education
Theatres
Museums

Services directed at
intangible assets, e.g.,:
Banking
Accounting
Insurance

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Relationship with the Customer

What is the type of the relationship between the
service company and the customer?
Nature of service
delivery

Continuous
delivery of service
Discrete
transactions

Membership
relationship
Insurance
Telephone subscription

Theatre series
subscription
Football club free season
ticket

No formal
relationship
Police protection
Radio stations

Car rental
Mail service
Pay phone
Public transportation
Restaurant

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Customisation and Judgment in Service Delivery

Extent to which the characteristics of a service
are customised
Extent to which frontline staff have judgment
in meeting individual
customer needs

High

High

Legal services
Health surgery
Architectural design for a
private residence
Private lessons

Low

Telephone service
Hotel services
Expensive restaurants

Low

Large class university

education
Architectural design for
blocks of residence

Public transportation
Fast-food restaurants

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Nature of a Services Demand relative to Supply

Extent of demand fluctuates over time

Extent to which supply
is constricted

Peak demand can

be usually met
without major
delay
Peak demand
regularly exceeds
capacity

Wide
Electricity
Telephone
Police and fire
emergencies

Hotel accommodation
Restaurants

Narrow
Insurance
Legal services
Banking

Service similar to the

above, but with incapable
capacity

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Method of Service Delivery

Availability of service outlets
Nature of interaction
between customers and
service organisation

Customer goes to
service
organisation
Service
organisation goes
to customer
Customer and
service
organisation
transact at arms
length

Single site
Theatre
Hairdressers

Multiple sites
Bus service
Fast-food chain

Garden services
Taxi

Mail delivery services

Road assistance services
for cars

Credit card
Local TV station
Internet banking

Broadcast network
National TV station

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The Service Industry

Transportation services
Communication services
Wholesale and trade
Retailing
Financial services (banking,
insurance, real estate etc.)

Tourism services
Health services
Auto repair services
Business services
Legal services
Government services
Education

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Further Readings

Levitt, T., (1981), Marketing Intangible Products and

Product Intangibles, Harvard Business Review, MayJune, pp. 94-102.
Lovelock, C.H., (1983), Classifying Services to Gain
Strategic Marketing Insights, Journal of Marketing, Vol.
47, Summer, pp. 9-20.
Shostack, L.G., (1977), Breaking Free from Product
Marketing, Journal of Marketing, Vol. 41, April, pp. 7380.
Zeithaml, V.A., Parasuraman, A. and Berry, L., (1985),
Problems and Strategies in Services Marketing, Journal
of Marketing, Vol. 49, Spring, pp. 33-46.
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